CANADA FX DEBT-C$ boosted by strong domestic jobs data

Fri Nov 7, 2008 10:16am EST
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 * Canadian economy creates 9,500 jobs in October
 * Data provides immediate lift to Canadian dollar
 * Bond prices lower after data and higher equities
 By Frank Pingue
 TORONTO, Nov 7 (Reuters) - The Canadian dollar rose versus
a weaker U.S. dollar on Friday following an unexpectedly strong
domestic jobs report and a U.S. report that showed job losses
were much worse than feared.
 Bond prices were all lower as the Canadian data sapped
interest for government debt, while a slide in the bigger U.S.
Treasury market also influenced direction in Canada.
 At 10:05 a.m. (1505 GMT), the Canadian unit was at C$1.1810
to the U.S. dollar, or 84.67 U.S. cents, up from C$1.1916 to
the U.S. dollar, or 83.92 U.S. cents, at Thursday's close.
 The currency had been lower but rallied after the Canadian
data showed the economy added 9,500 jobs, compared with
forecasts for it to shed 10,000 jobs. Also boosting the
currency was a weakening of the greenback after the U.S. data
showed job losses soared and the U.S. jobless rate hit a
14-year high.
 "The Canadian numbers were stronger than expected so we did
see a mild rally in the Canadian dollar," said George Davis,
chief technical strategist at Royal Bank of Canada. "Then we
started to drift lower just ahead of the (U.S.) data, but once
that came out we saw a follow through to the downside (for the
U.S. dollar)."
 Davis also said the strong Canadian data will not likely
alter expectations for a Bank of Canada interest rate cut next
month given the underlying weakness in the U.S. economy and
weak data from other areas of the global economy.
 "I think given the fact that we are continuing to see this
weakness ... it is going to keep the probability of at least a
25-basis-point rate cut on the table for the Bank of Canada,"
Davis said.
 The Bank of Canada has cut its key overnight rate by 2.25
percentage points since last December and will make its last
scheduled interest rate announcement for 2008 on Dec. 9.
 Canadian bond prices were all lower given the stronger
Canadian jobs data and a slight rebound in North American
equities at the open after losses in the previous session.
 But Michael Gregory, a senior economist at BMO Capital
Markets, said the slide in bond prices may be temporary as
fears of a global recession could prompt dealers to snap up
more secure government debt ahead of the weekend,
 "The key thing here is very much that a recession is never
ever a good thing for equity markets ... and it's only a matter
of time before (the bond market) comes around and does better,"
Gregory said.
 The Canadian overnight Libor rate LIBOR01 was 2.5000,
unchanged from 2.5000 percent on Thursday.
 Thursday's CORRA rate CORRA= was 2.2419 percent, up from
2.2402 percent on Wednesday. The Bank of Canada publishes the
previous day's rate at around 9 a.m. daily.
 The two-year bond was down 14 Canadian cents at C$101.57 to
yield 1.966 percent. The 10-year bond slipped 13 Canadian cents
to C$103.92 to yield 3.757 percent.
 The yield spread between the two- and 10-year bond was 178
basis points, down from 185 basis points at the previous close.
 The 30-year bond was down 45 Canadian cents at C$112.25 to
yield 4.254 percent. In the United States, the 30-year Treasury
yielded 4.256 percent.
 (Editing by Peter Galloway)